Will warehousing, as a commercial realty, be the lifeline for India's growth?

It is an indisputable fact that the covid-19 pandemic dealt a severe setback to countries and economies all across the world. The measures taken by governments to deal with the spread of the contagion, its control, and its aftermath took a severe toll on businesses, industries, and markets. In India, the real estate sector too bore the brunt of the virus.

The residential market was already coping with the effects of various regulatory and procedural changes, further augmented by liquidity challenges when the pandemic hit. The arrival of the pandemic against this backdrop ensured the market deteriorated further and magnified its shortfalls. Nevertheless, what caused great consternation was the impact that COVID -19 had on the commercial real estate market.

The sector was doing astonishingly well with record-high sales in office space till the time the virus appeared on the horizon. However, with the onset of the pandemic, the government was forced to put a full stop to international travel, enforce nation-wide lockdowns and impose social distancing to ensure the virus didn’t penetrate further into the masses. These steps resulted in the postponement of the deals and projects with foreign collaborators and investors. While the lockdown conditions no longer exist, the aftermath is still very much present.

Since warehousing is the essential link that provides the flow of goods or services between the supplier and customer, it is key to the survival of all industries and sectors. The impositions arising out of the global pandemic led to its breakdown, halting stock supply, and ensuring all business activities ceased in the market. The supply chain and in turn, warehousing was perhaps one of the worst affected segments of the industry. The segment was always considered an underdog in the real estate sector. Many real estate developers did not look at it as an asset option as it was looked upon as a ‘glorified godown’. 

However, there was a heavier reliance on e-commerce due to the increased usage of the internet during these challenging times, giving a further push to logistics and warehousing. These segments were already receiving attention from developers as potential money-making investments. The global pandemic acted as a catalyst to further thrust warehousing under the spotlight amidst a weak real estate market.

This state of affairs is likely to continue in the ‘new normal’ as we have now come to accept the terms and conditions that come attached to co-existing with the global health crisis. The prevailing market sentiments of social isolation, ‘no-touch’, and ‘zero contact’ practiced at an individual level will ensure e-Commerce remains as the preferred channel for consumers, giving impetus to warehousing investment. This situation will only lead to the development of e-Commerce in the market. Since warehousing is integral to e-Commerce, their success and progress are inter-linked and vital to the existence of each other, it is a given that the segment will see a corresponding growth. 

In the post-COVID scenario, the segment has emerged as the most crucial lifeline for India's economic recovery. Leading amongst the learnings that have been gained in the aftermath of the pandemic is the lesson to ensure that the supply chain remains protected. Warehouses that were earlier located on the outskirts of cities and towns to facilitate smoother and faster passage are now being planned within city limits to ensure any unexpected crisis does not disrupt the supply chain. 

This rationalization will enable suppliers to save delivery time and transportation costs. The recently announced PM’s vision of ‘Atmanirbhar Bharat’, aimed at encouraging local production and sourcing towards a self-reliant India will also prove to be an incentive to the segment. This demand will lead to an augmented need for warehousing facilities in the nation thereby pushing the growth of the sector.

Given the increased globalization and commercialization across urban and rural areas, warehousing at key locations assumes a greater significance. The impetus being given to infrastructure investment through National Infrastructure Pipeline (NIP), road construction under ‘Sagarmala’ and highway construction under ‘Bharatmala’, can only bear fruit if the infrastructure boosts real estate consumption. And that can only occur once it is matched by the investment in the warehousing sector.